Are you wondering what life insurance means? As a result of a life insurance policy, an insurance provider promises to pay a specific amount of money to the individual's family or beneficiary in return for regular payments over time. These payments are known as premiums, and they are usually made annually. A policyholder is a person who purchases insurance. The unexpected death of the policyholder can result in a lump sum payment being made to the policyholder's family. The money cannot make up for the loss, but it ensures the family doesn't suffer any financial hardship after the breadwinner passes away. You can use life insurance to protect yourself against risk and to grow your savings. It is also an effective tool to help you save for future expenses such as higher education or children's marriage. A life insurance policy is especially important for people who have minor children or children with special needs, or who wish to build long-term savings for their family. A policy should be purchased as early as possible since premiums rise with age and if a person smokes or has pre-existing conditions.
Benefits of Life Insurance
The family of the life assured can receive financial support in difficult circumstances, such as the unforeseen death of the life assured during the policy period. When the policy is active, the nominee/family of the life assured receives a death benefit in the event of the untimely death of the life assured during the coverage period. Even if the life assured is not around, the death benefit shall help the family of the life assured to meet their immediate financial expenses, and daily expenses, and pursue their dreams.
Life insurance plans offer the following benefits:
1. Coverage for life - The death benefit of a life insurance policy provides financial security to the insured family in the event of the death of the policyholder. In this way, life insurance serves as a shield and ensures that the goals and aspirations of the insured's family members are not harmed.
2. Having peace of mind - An individual can feel at peace with their lives because life insurance provides them with life insurance coverage and also ensures that their loved ones are financially secure in the event of an untimely death. Additionally, life insurance provides financial assistance in times of medical emergencies, which reduces the stress associated with arranging funds at the same time.
3. Benefits of taxation - Tax deductions are available for life insurance premiums under Section 80C of the Income Tax Act. According to Section 10D, the sum assured received upon maturity of a life insurance plan is tax-free if the premium is at least 10 times the premium or up to 10% of the sum assured.
4. Loans against life insurance policies are available - To overcome any urgent requirements of the policyholder, life insurance policies provide an option to take out a loan against the existing policy. An amount can be borrowed without affecting the benefits offered by life insurance. Insurance plans with loans are only available for some insurance plans.
5. Benefits related to income - If the insured dies untimely, a Money-Back Insurance plan can provide regular income in intervals to the insured's loved ones. Family members of the insured are financially independent and secure as a result.
6. Coverage for critical illnesses - Plans that cover critical illnesses are available in some life insurance policies. Life insurance plans may include critical illness cover as part of their benefits or they can be purchased separately for additional coverage. The critical illness cover provides financial assistance at the time of diagnosis for any critical illness that is covered by the insurance company. Furthermore, this cover provides financial assistance for medical expenses incurred at the hospital.
7. The premiums are lower - In the long run, buying life insurance at a young age can be very cost-effective. Life insurance premiums are calculated based on factors such as the age and health of the life assured. A person in their twenties or thirties is generally in better health, which makes the cost of a life insurance policy quite affordable when compared to an older investor. Older investors tend to pay higher premiums for life insurance because they are more prone to diseases that require additional coverage. As a result of a high life expectancy, premiums for young investors are low. Young people should invest in life insurance policies.
8. Affordability and high coverage - If you purchase a life insurance plan as soon as you start earning a living for yourself and your family, you can get comprehensive coverage at a low premium. During the duration of a life insurance policy, the premium remains the same if you purchase it at a young age.
9. Financial security at an early age - You may not feel the need to purchase a life insurance policy at a young age, but what you don't realize is that by purchasing a life insurance policy you are ensuring financial security for your family in case of an unforeseen demise during the coverage period. Although you may think you don't need to worry about your family's financial security at a young age, your sudden death may leave them unprotected. As a result, your family may struggle financially and may have to compromise on their dreams. In the event of your sudden death, life insurance can help your family to meet their daily financial expenses and pursue their dreams in your absence.
10. Benefits upon death - In case of your sudden demise during the policy tenure, your family is financially protected by a life insurance policy. As long as the policy is active, the nominee/family of the life assured is entitled to the sum assured/death benefit in the event of untimely death during the policy tenure. Your family's financial security is enhanced by this benefit of the life insurance policy.
11. Component of investment - ULIPs, Money-Back plans, Retirement plans, Child Life plans, and Endowment plans are all types of life insurance policies available in the market. Life insurance policies with investment components can provide wealth appreciation or invest a portion of premiums into market-linked investments. As a result, you create a corpus for yourself while obtaining the benefit of life insurance.
Who Should Buy Life Insurance?
1. Adults who are young and single - Young people are the ones who need life insurance the least. People who are very young, single, and do not depend on anyone for their finances do not usually need life insurance. People who buy life insurance at a young age do so to ensure that the premiums stay low even when they need life insurance in a few years. A person's premiums increase as they age, and so do their chances of contracting diseases, which will affect their medical tests.
2. Families newly formed - New families or people about to get married should be the first to purchase life insurance. There are several reasons for this. No matter whether both partners work, as soon as you start a family, there is someone who depends on you. Any future children will also benefit from the life insurance payout if something were to happen to them. Life insurance premiums are lower when you get married or when you're newlywed.
3. Families that already exist - Life insurance for families must be in place if there is at least one breadwinner and children in the family. The family will need some financial stability if you were to die as the sole breadwinner bringing a monthly income to pay for your children's education, house bills, rent or EMIs, and day-to-day expenses. When both you and your partner work, a life insurance policy is necessary to cover people working inside the home, such as child caretakers and housekeepers.
4. Home loan holders - Buying a home via a home loan is a significant expense, and if you die, your family may not be able to pay the EMIs. Having life insurance will ensure that your family home is secure because the death benefit paid to your family can be used to pay your loan EMIs. Many insurance companies also offer monthly installments as part of the death benefit, making it easier to pay your family's home loan EMIs on a regular basis.
5. Non-parental working couples - It may or may not be necessary to purchase life insurance for a married couple without a child and who both make a monthly income. If both partners choose not to purchase life insurance in this case, they will need to weigh their options. Salary is the most important factor. Does the other partner have the ability to maintain their lifestyle comfortably on their salary alone if one of the partners passes away? They do not need life insurance if the answer is yes. A life insurance policy will leave the other partner in a much better position if one partner contributes a much higher amount to the finances, provided the cost of premiums is not too high.
6. Employees who are covered by their company's life insurance - Life insurance is provided by many companies to their employees. Are company-provided life insurance policies sufficient or should you also purchase a separate life insurance policy? It is the latter situation that you should strive for. Work-related life insurance policies terminate when you leave your employer, which is a problem. When you're out of work or in between jobs, it's best to have a separate life insurance policy to ensure that you're covered.
7. Owners of businesses - When you're a business owner or partner, you're likely to have many people depending on you. The unfortunate thing would be if you died, they would be in an unfavorable position. Therefore, you should always take out a separate business life insurance policy to cover your obligations.
8. Children's life insurance - Most children do not need life insurance, except in very specific circumstances. You might consider getting life insurance for your child if you suspect he or she may develop a hereditary condition later in life when they are older. As a result, they would be able to pass the medical evaluation and obtain a life insurance policy they can use for their own families. In the event that they do develop the condition and then apply for life insurance, their chances of passing the medical exam will be slim and their premiums will be much higher.
9. Parents' life insurance - This strategy is considered by some to be a good one for financial stability. When your parents are young enough, you can get life insurance for them, with you as the sole beneficiary or one of the beneficiaries. Although the premiums might be high, if your parents are young and have no illnesses, you might be able to pay the premiums and receive the death benefit.
10. People over the age of 65 and retired - Senior citizens and retirees do not need life insurance because they don't have anyone depending on them for their finances, and the cost of life insurance at this stage would be high. A person can, however, go for a life insurance policy if they wish to leave a substantial amount of money as a backup or save for a spouse or child, provided they pass the medical test and are prepared to pay higher premiums.
Features of Life Insurance
1. The policyholder - The majority of insurance companies only offer plans for individuals, so you can obtain coverage based on your needs. It is possible to save money on premiums with some of them if you opt for joint life plans. Aside from that, it also works as a single insurance policy that will simplify the process.
2. Premium - Buying a policy from an insurer requires you to understand the life insurance definition. You have to pay premiums to an insurance company as part of an agreement. When you choose a policy, you will have to pay a premium. In order to keep your plan active, you should pay more attention to the premiums. Depending on your preferences, you can choose the mode of payment for your premium. Before choosing a plan, you can calculate the premium rates.
3. Customizing tenure - When buying an insurance policy, you should choose a tenure. There is only a limited period of protection provided by a policy. In order to meet your needs and requirements, you should customize your plan. With a customized policy, you can select the coverage that will best help you achieve your goals.
4. Amount Assured - In the event of your death, your nominee will receive the sum assuredly provided by your insurer. The sum assured amount can be customized based on your tenure when purchasing your policy. You should choose your sum assured amount wisely because it affects your premiums.
5. Value of surrender - When purchasing a life insurance plan, the surrender value is the most important factor to consider. Exit premiums are paid by insurers when you want to end your policy. Make sure you pay premiums for at least two years for a 10-year policy and three years for a policy with a duration of more than ten years. As a result, it is important to know the surrender value in detail.
6. The nominee - Upon your unfortunate death, your nominee will receive the amount you designated in your life insurance policy. It is therefore important to make sure that when you purchase a plan, you have the option of changing the nominees at any time.
7. Age of entry - When buying life insurance from an insurer, you should know what the minimum and maximum entry age is. Additionally, it provides you with the opportunity to choose a plan that will ensure maximum protection from potential threats.
8. Benefits of maturity - Upon expiration of your policy, you will receive a lump sum payment. Depending on your needs, insurance companies offer different maturity plans on the market. You can generate more income with an endowment policy, which combines investment and insurance plans.
9. The riders - The benefits of a life insurance plan can be significantly enhanced by adding riders. Some riders an insurer provides include accidental death benefits, critical illness coverage, partial disability coverage, and complete disability coverage. Your requirements can dictate which of these you choose.
10. Options for investing - It is possible to generate regular income with some life insurance policies that come with investment options, such as ULIP plans. Additionally, they are suitable for diversifying your portfolio to meet your financial planning needs.
11. Sustainability - You should keep renewability in mind when investing in a life insurance policy. In order to extend coverage, you should check whether a plan has a renewability option.
Importance of Life Insurance
1. Protecting your family financially is possible with it - It's important to protect the financial future of your family with life insurance. It is unlikely that your savings would be enough to support your family for several years or even decades if you were to pass away unexpectedly. Term life insurance, whole life insurance, and universal life insurance are the most common types of life insurance.
2. Recovering lost income is possible with it - Your income might cover all or part of the needs of your family, whether you work a 9-to-5, are self-employed, or own a small business. Even without your income, your family will still need to cover expenses like housing, food, utilities, clothing, car maintenance, and health care premiums. Your family may need the death benefit from a life insurance policy to cover these expenses. Consider using a life insurance calculator to determine how much life insurance you may need when considering your options.
3. You can help your loved ones pay off debt with it - It is possible that your loved ones will have to sell off other assets or use money from your estate to pay off certain types of debt when you die. It could leave less money for expenses. Life insurance can help your loved ones pay off any debt you leave behind, including credit card debt, business debt, personal and education loans, and mortgage debt. In the aftermath of your death, life insurance can ease some of the financial burdens your loved ones may be experiencing.
4. Expenses associated with funerals can be covered by it - The cost of a funeral can be high. You and your family might feel emotionally stressed as a result of this financial stress. It may be possible for your family to use some of the death benefits from your life insurance policy to help cover some of these expenses. The beneficiary of the policy could direct part of the death benefit to the funeral home, or they could pay out of pocket and use the death benefit as reimbursement.
5. Expenses associated with future education can be covered by it - The cost of future childcare and education, especially for college, can be covered by life insurance if you have children. You can use a life insurance policy's death benefit to help pay for your children's education even if you've already started contributing to a 529 college savings plan.
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Types of policy
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Explanation
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Term
insurance
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A term
insurance policy is the simplest form of life insurance. Term insurance is a
pure risk cover policy that protects the insured for a specific period of
time. If the policyholder dies during the policy term, the beneficiaries
receive a fixed sum of money called the sum assured.
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Whole life
insurance
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Throughout
the policyholder's life, a whole life policy covers him against death. There
is no definition of the validity of this life insurance policy; therefore,
the individual enjoys the coverage. When the policyholder dies, the family
receives the corpus from this life insurance policy.
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Endowment
policy
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Endowment
policies combine financial savings and risk cover, making them popular
life insurance policies. A pure endowment insurance policy has two benefits
for policyholders. First, the beneficiary receives the sum assured in the
event of death during the tenure. Upon surviving the policy tenure, the
individual receives back the premiums paid along with other benefits.
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Money back
policy
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Periodic
payments are one of the reasons why many people prefer this life insurance
policy. A portion of the sum assured is paid out regularly. In the event that
the policyholder survives the term, he will receive the balance of the
benefit.
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ULIP
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ULIPs are
market-linked life insurance products that provide both life protection and
wealth creation. A portion of the money invested in ULIPs provides life
insurance, while the remainder is invested in equity and debt instruments.
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Annuity
and pension
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These life
insurance policies provide a periodic payment to the insured by the insurer.
An annuity provides regular payments of money in the form of a pension while
protecting against financial risks.
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How To Buy The Best Life Insurance Plans Online?
Some people have doubts about buying life insurance policies online even though it is a very simple process. You should purchase a life insurance policy online for the following reasons:
- It's convenient - Online life insurance policies can be purchased at any time, anywhere as per the convenience of the buyer. A life insurance policy can be purchased online from the comfort of your home without having to visit an insurance company branch office. The process of purchasing a life insurance policy is very convenient because it is hassle-free, completely digital, and time-saving, and you can make the payment through different payment gateways.
- Freedom of Choice - You have the freedom to choose the life insurance plan according to your budget, requirements, and preferences when you choose to purchase a life insurance policy online.
- Comparisons in a flash - Calculate the premium for your life insurance policy online and compare several plans according to your needs and budget using an online life insurance premium calculator. Using the premium calculator tool, you can compare life insurance plans based on the information you enter. Several life insurance plans can be compared at once.
- Payments that are secure - It is common for people to fear that providing their bank details or credit card numbers online on a website may lead to misuse of the information, but payment gateways are always encrypted to ensure customer security. Payments for life insurance policies are secure and encrypted.
List of Life Insurance Companies
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Max Life Insurance
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HDFC Life Insurance
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Tata AIA Life Insurance
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ICICI
prudential Life Insurance
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BAJAJ
ALLIANZ Life Insurance
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Points to Consider Before Buying Life Insurance
1. Coverage amount - The first thing you need to do is get this right. Coverage should be adequate to protect your family, but not so large that you cannot afford it. It is recommended that you purchase a life insurance policy that is at least 10 to 15 times your annual income. For a more accurate estimate, you can use an online life insurance coverage calculator.
If you have sufficient coverage, your family will still be able to meet their daily needs even if you are absent. Additionally, it can also help them achieve their life goals.
2. Policy type - Life insurance policies come in various forms, each with its own advantages. It is crucial that you determine your needs and goals, and then choose a policy type that best meets them. Listed below is a brief overview of the types of policies that align with your common financial goals.
3. Coverage tenure - In addition to choosing the type of plan and the amount of coverage, you should also decide how long the coverage will last. Life insurance plans (except whole life insurance) provide coverage for a specific period of time. The only deaths covered during this period are those occurring during this period. Therefore, it makes sense to have a life insurance plan with a longer tenure rather than a shorter one. The ideal life insurance policy should last until your retirement, at the very least. The reason for this is that during your active working years, your family will depend on your income to meet their needs. If anything happens to you during this time, your life insurance plan acts as a safety net for them.
4. Payment mode for premium services - In general, you can either pay a single, lump-sum premium upfront or a regular premium on a periodic basis, depending on the policy you choose. Second, you can choose to pay your premium on a monthly, quarterly, semiannual, or annual basis. Consider this aspect and choose the payment method that is most convenient for you. Some plans allow you to pay the premium for a shorter period than the policy tenure. That's another aspect to consider.
5. Policy terms and conditions - You should also consider other terms and conditions of a life insurance policy. If you are having trouble paying your premiums, check out the grace period offered. Check to see if there is a waiting period. Take a look at the other terms governing the policy, such as the nomination, the option to take out a loan, and the surrender charges.
6. Life insurance provider - Choosing the right life insurance provider is also important. The following parameters can help you identify a good life insurance provider.
7. Riders with add-ons - The cost of your life insurance plan is another important factor to consider before you purchase it. It is usually possible to add riders to your life insurance policy at the time of purchase. The type of policy and the insurance provider will determine which riders are included. The following are some common riders you can choose from.
- Riders' premiums waived
- Rider for accidental death benefits
- Rider for a permanent and total disability caused by an accident
- Rider for critical illnesses
- Rider for surgical care
These riders require a nominal additional premium, but they provide additional coverage and benefits beyond your base plan.
What Are The Factors That Affect Life Insurance Premiums?
1. The age - Life insurance premiums are heavily influenced by your date of birth. Younger policyholders pay lower life insurance premiums for a variety of reasons. Insurers charge higher premiums as you get older because they are more likely to have to pay out on your policy.
2. Based on gender - There is a tendency for women to live longer than men. In India, women have an average life expectancy of 81.1 years and men have an average life expectancy of 76.1 years. Women generally pay less for life insurance than men because of the disparity.
3. History of health - Before issuing a policy, insurers may require a medical exam and access to your health records. The higher your premiums will be if you have a history of medical conditions, especially serious ones like heart disease or cancer. Additionally, insurers will look at your weight, cholesterol levels, blood pressure, and other metrics that could indicate future medical problems.
4. Health history of the family - Life insurance premiums may increase if you have a family history of illness, especially hereditary diseases.
5. The smoking habit - The health risks associated with smoking, including potentially fatal diseases like cancer, result in higher premiums. Contact your provider if you've quit smoking since purchasing life insurance (congrats, by the way!).
6. Interests - Is skydiving part of your weekend routine? Are you passionate about racing cars? Activities that fall into this category vary by insurer, but high-risk hobbies could raise premiums. Getting quotes from several companies may be beneficial if you participate in high-risk hobbies.
7. The occupation - Many professions are considered more hazardous than others, such as logging, piloting, and roofing. Your work will be questioned by insurers when you apply for life insurance. In the event that you work in an occupation that exposes you to toxic chemicals or requires you to perform dangerous tasks, your premiums may be higher.
8. As per the policy - Your life insurance premium is also affected by the specifics of the policy you select. A policy with a larger benefit amount over a longer term generally costs more than one with a smaller benefit amount over a shorter term. There are also differences between whole-life and term life insurance policies. Policies for whole life insurance, or permanent life insurance, tend to be more expensive than policies for term life insurance.
Claim Settlement Process For Life Insurance Policy
Here are the steps that most insurance companies follow when settling a life insurance claim. Each insurer operates differently, therefore, the claim settlement process for a life insurance claim can differ from one to another:
Step 1: Claim Intimation: The beneficiary is required to inform the insurer of the claim either in a written format or online (on the official website of the insurer). Claims intimations should include information about the policyholder and the claimant, such as the policy number, name of the policyholder, cause of death, and place of death. Alternatively, the beneficiary can download the forms online from the insurance company's website or visit the company for claim intimation.
Step 2: Submission of Documents: As part of the claim settlement process, some documents must be submitted by the beneficiary within the stipulated timeframe. As a result of the relevant documents, the insurance company may investigate the case if needed or request additional documents. It is necessary to submit relevant documents at this stage in order to prevent any possibility of fraud.
Step 3: Claim Evaluation and Settlement: Once all the documents have been submitted to the insurance company and the claim has been evaluated thoroughly, the insurance company decides whether to settle the claim. Once an insurance company receives the documents, it usually takes 30 days to settle a claim. The insurance company takes 120 days to settle a claim if an investigation is required.
